Published December 9, 2009

Super-rich Chinese - London's next big act

Wealth banks look to Chinese who are outspending Arabs

(LONDON) The fear that established clients will flee rising UK taxes might be giving London's private bankers sleepless nights, but a Chinese remedy is at hand, in the shape of a growing colony of super-rich clients from Asia.

Signs from high-end jewellers, real estate brokers and law firms are signalling the arrival of the Chinese ultra-wealthy in London, following in the footsteps of older billionaire enclaves from Russia, India and the Middle East.

'The Chinese haven't arrived in London en masse yet, but they're going to be the next big act in town,' said James Fleming, a private banker at Coutts, the wealth management arm of Royal Bank of Scotland.

China's population of wealthy, defined as having more than US$1 million in investible assets, surpassed that of the UK in 2008, according to a survey by Merrill Lynch, and it now ranks fourth in the world.

In Asia, the number of ultra rich, with at least US$30 million, stands at 14,300, compared with 18,000 in Europe.

Signs that London retains its allure to the world's super wealthy will come as a relief to a British private banking industry made increasingly nervous by the threats from high earners to leave in large numbers.

A recent poll conducted by law firm Withers of 151 high net worth individuals and their advisers found 64 per cent of rich UK residents are considering leaving, with Switzerland, Hong Kong and Monaco cited as likely destinations.

But traders on London's Bond Street, a shopping strip of exclusive jewellers, art dealers and fashion retailers that bisects the elite Mayfair district report Chinese shoppers now outspend their Russian and Arab counterparts.

Chinese shoppers spent more than 3 million (S$6.8 million) on Bond Street during the six months to September, more than double the previous period, according to figures from the Bond Street Association of traders on the street.

London's upmarket estate agents also report a surge in interest from Asian, particularly Chinese, buyers of properties in the prime districts of Mayfair and Belgravia, where little sells for less than 1 million.

'Besides the Middle East, we are still seeing interest from Russia, and more and more from China,' said Jonathan Hewlett, who works at upmarket property consultant Savills.

Immigration lawyers servicing rich visa applicants also report growing demand, with no noticeable drop in enquiries since the government revealed plans to hike tax rates.

Samar Shams, an associate specialising in immigration at lawyer Lewis Silkin, said enquiries into the expensive Tier 1 Investor category visa were accelerating.

To qualify, a prospective migrant must have funds of at least 1 million, and once accepted must invest at least 750,000 in government debt, shares in UK companies or UK corporate bonds.

'The volume of applications has gone up pretty significantly in the last couple of years,' she said.

Despite reports that planned tax increases would lead to an exodus among Britain's wealthy, people working in the wealth industry say London remains an attractive tax haven, and enough of its non-domiciled residents may stay.

Global income and capital gains of a non-domiciled resident are not currently taxable in the UK unless remitted, and plans to levy a yearly 30,000 charge on overseas income after seven years will for many of them cause no serious pain.

'For the super wealthy, for whom such a charge remains proportionately low, the UK still provides tax haven status for those with major income and gains overseas,' said David Poole, head of Citigroup's private bank in the UK. -- Reuters